An interesting challenge to established English law relating to responsibility under CMR for excise duty where goods are lost or stolen. Strongly maintaining the existing English law position, particularly post Brexit and COVID, brings welcome certainty to the logistics industry.

The Facts

JTI Polska Sp. ZOO. (“JTI) contracted with Jakubowski to transport cigarettes from Poland to England. The road carriage was subject to CMR. Under a European excise duty suspension arrangement, excise duty on the cigarettes was suspended until the cargo was released for commercial consumption, or, in the case of non-delivery or theft, was deemed to have been released for commercial consumption.

Thieves stole 289 cases of cigarettes with a market value of GBP72,512, while the truck was parked in a service station on the M25 motorway in England. JTI incurred excise duty of GBP449,557 because the cigarettes were deemed to have been released for commercial consumption in the UK. JTI subsequently claimed compensation for the duty from Jakubowski under Article 23.4 of CMR.

Article 23.4 provides that, in the case of the loss of goods, a claimant may claim "carriage charges, customs duties and other charges incurred in respect of the carriage of the goods", in addition to the value of the goods. Courts around CMR ratifying states have interpreted this in two main ways:

• The broad interpretation: excise duty arises from the way that the goods were actually carried and lost, and can therefore be claimed
• The narrow interpretation: only charges which would have been incurred if the carriage had been performed without incident can be claimed, and excise duty is therefore excluded.

In James Buchanan & Co. Ltd v Babco Forwarding & Shipping (UK) Ltd¹ the House of Lords (by a 3:2 majority) adopted the broad interpretation. JTI asserted that Buchanan was wrongly decided and gained a certificate, subject to the 1966 Practice Statement, to appeal directly to the Supreme Court.

The Judgment

The Supreme Court unanimously dismissed the appeal. Under the Practice Statement, a House of Lords (or Supreme Court) judgment is normally binding, but can be departed from when it appears right to do so.  However, a decision on interpretation will not be departed from if it reflects a tenable view. 

There were powerful arguments in favour of the narrow interpretation, mainly based on the purpose of chapter IV of CMR, in which Article 23.4 is located, and on the structure of the compensation scheme for loss of goods under CMR. The narrow interpretation has already been applied to the corresponding rail convention (CIM),

But the broad interpretation has been accepted by courts in France, Denmark, Czech Republic, Lithuania, Italy and (arguably) Belgium – although not in Netherlands, Germany and Sweden – and UK courts could appropriately be persuaded by this in the interests of harmonisation.

Further, “in respect of” at Article 23.4 was held to be equivalent to “in connection with” and it was difficult to argue that a loss which occurred during the course of road carriage and resulted from the way in which the carriage was performed was not in connection with the carriage. Moreover, the wording at Article 23.4 differs from the wording at Article 6.1(i) (which deals with consignment notes). Article 6.1(i) refers to charges "incurred from the making of the contract to the time of delivery", and it is easier to apply the narrow interpretation to this formulation. The broad interpretation was therefore tenable. 

The court took five additional points into account:

• Reversing Buchanan would not bring us any closer to harmonisation. “Broad” and “narrow” interpretation camps would still exist around Europe. This could only be done by amending the text of CMR (as was done in the case of CIM before the result, mentioned above, was reached)
• The Buchanan decision works satisfactorily in the market and is not manifestly unjust
• Jakubowski attempted to rely on uncertainty created by the judgment in Sandeman Coprimar SA v Transitos y Transportes Integrales^2, in which the Court of Appeal stated that Buchanan should “not be applied any more widely than respect for the doctrine of precedent requires”. This was inappropriate and should not be followed – it is not for appellate judges to challenge House of Lords (or Supreme Court) judgments
• Published travaux préparatoires on the CMR are lacking and the documents which Jakubowski assembled in an attempt to compensate for this did not persuasively establish the intentions of the drafters
• Although there is academic opinion opposed to Buchanan, this is muted and not entirely consistent.

Comment

This judgment confirms law which has been in place for almost half a century and brings certainty by resolving the conflict between Sandeman and Buchanan. There had been claims ”in limbo” awaiting the decision. There has been enough disruption and uncertainty caused to the transportation industry by Brexit and Covid, without unnecessarily adding to it.

The case highlights that the “leapfrogging” procedure under the 1966 Practice Statement should not overturn longstanding precedent without very good reason.

Finally, appellate judges should now know that, if they disagree with higher court decisions, their powers are limited to granting permission to appeal them, and do not extend to attempts to restrict the operation of precedent.

JTI POLSKA Sp ZOO & Others v JAKUBOWSKI & Others [2023] UKSC 19

² [1978] AC 141

³ [2003] EWCA Civ 113

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